NORTHUMBRIAN Water looks likely to get the go-ahead to raise household bills.

Water industry regulator Ofwat last night indicated it was considering raising the price limits Northumbrian and two other water companies can charge customers.

Anglian Water Services, United Utilities and Northumbrian all indicated to the regulator that they needed substantial billing rises over the next five years.

The move is necessary to make up for unduly low prices set by a previous regulator five years ago.

The three companies said they had experienced major changes to their income and costs that were not included in Ofwat's calculations the last time it set their price limits.

They want to raise more revenue from customers to cover the cost of investment needed for work including leaks and flooding caused by old pipes, some of which date back to the Victorian era.

Water industry lobby groups have already warned bills must go up by an average of £15 a year in the second half of this decade to help fund a 25 per cent increase in investment to £21bn.

If the regulator agrees with the water companies, customers' bills will go up in April next year. It would also be taken into account when Ofwat sets price limits for 2005 to 2010.

But the prospect of higher bills has rung alarm bells at consumer watchdog WaterVoice, which warned in August that some customers could pay as much as £175 more over the five years.

The current price limits for all water companies were set in November 1999, but the regulatory system allows firms to ask Ofwat to review their pricing if there are major financial changes.

Philip Fletcher, director general of Ofwat, said: "I must by law set price limits to enable efficient companies to finance their functions.

"But in reaching my decision, I will ensure that customers pay no more than is necessary to allow the companies to continue to deliver an efficient service."

Both Anglian and United said they needed to raise prices because of higher construction costs, increasing customer debts, new requirements to monitor water quality, and the need to address sewer flooding.

Northumbrian has also applied for changes because it said it had suffered a substantial and unforeseen fall in revenue because of lower demand from big users and fewer new properties in its catchment area than expected.

Ofwat consults on draft decisions in early November. It will announce final decisions in December.